Tech entrepreneur Mike Lynch has lost his right to a seat on the board of Darktrace after his stake in the tech company fell below the required threshold.
Lynch, who recently settled a lawsuit with the Serious Fraud Office (SFO), previously held a 21 per cent stake in Darktrace through his investment fund, Invoke Capital, which was founded in 2021.
But an analysis of the Darktrace shareholder register reveals that Invoke’s holding has fallen below the 10 per cent level needed to appoint a non-executive director, according to the Times.
In December last year, Darktrace investors rejected a board appointment of Patrick Jacob, a representative for Lynch, as the businessman’s involvement in a fraud trial in the US caused a shadow to hang over the cyber security company.
At the time, one institutional investor wrote to the company: “Mike Lynch’s trial in the US creates unhelpful headline risk for Darktrace which we view as unwarranted, so any move to distance Darktrace from these headlines is a positive in our eyes.
“Additionally, we do not believe granting a board seat to Invoke is conducive to helping Darktrace develop and mature as a global business and investment.”
Darktrace shares are up 80 per cent over the past year as its revenue has jumped following increasing demand for its cyber security services that are powered by artificial intelligence.
Invoke had been expected to put forward another representative to fill the seat in Jacob’s place
Invoke Capital, Lynch’s investment vehicle that seeded Darktrace, was granted the right to appoint a non-executive director to Darktrace’s board along with three other major investors holding more than a 10 per cent stake when the company went public in 2021.
It comes just over a month after Lynch settled a lawsuit with the SFO, right before both parties were due to fight it out in court. Lynch had filed a data lawsuit against the UK’s fraud agency at the end of January, ahead of his criminal trial in the US.
Lynch was extradited to the US last year on 16 fraud and conspiracy charges relating to Hewlett-Packard’s $11bn takeover of Autonomy back in 2011. He has denied any wrongdoing.
Darktrace declined to comment. City A.M. has reached out to Invoke Capital for comment.